Investing in Precious Metals – How Does It Work?

Experts suggest that Investing in precious metals is considered a smart move for financial security.  If you’re used to thinking about finances in terms of dollars and cents, then you may be wondering why someone would trust their financial future to a shiny brick. 

Whenever the economy becomes turbulent or uncertain, the champions of gold will say that now is the time to invest in precious metals. These strong proponents generally don’t like our country’s monetary system because it’s based on the dollar.  This is an issue for them because worth is an arbitrary amount set by the government. On the flip side, they believe that gold has intrinsic value, which can’t be affected or altered. 

However, that’s not necessarily true, since gold is only as valuable as any one person believes it to be. For example, in a true crisis, someone might believe that a loaf of bread is worth more to them than a pound of gold because the bread satisfies an immediate need. We could make a strong argument for investing in yeast and flour! 

On one hand, including gold in your investment portfolio can help you hedge against inflation.  This is because gold prices often move opposite to the dollar. Gold can also help you diversify your assets. However, many investment experts warn that you should be careful about how much gold you’re including in your portfolio.  They advise  limiting gold to no more than 5 to 10 percent of your portfolio.  Now lets get into how you can start dabbling in precious metals in the hopes of increasing your financial security.

How to invest in precious metals

Investing in precious metals isn’t as simple and straightforward as just buying gold or silver wherever you can find it. Instead, you have two options: buy the physical metal like bullion bars and bullion coins or invest in financial products like gold exchange-traded funds (ETFs).

Investing in buillion bars:

To buy bullion bars, you’ll want to find a reputable dealer on sites like APMEX and JM Bullion. Then, you’ll select gold bars by weight, quantity, and price. After the gold bars are shipped to you, you’ll want to keep them secure by putting them in a home safe or safety deposit box at your bank.

Investing in ETFs:

ETF stands for exchange-traded funds and you can buy these funds for all three precious metals.  They are a convenient and liquid from of buying and selling gold, silver or platinum.  Investing in precious metals through ETFs is definitely more convenient, but it does have some drawbacks. First, with an ETF, you don’t actually own the metal and have it in hand, so you’re ultimately relying on a financial institution to deliver on its promises to you. 

Gold or silver stocks:

These stocks allow you to invest in the companies that are mining metals, not the actual metals themselves.

Futures and options:

The futures and options markets offer both leverage and liquidity for those wanting to invest in metals.

Certificates:

Certificates offer a way to invest in metals without physical ownership. The one downside to certificates is that if there is a disastrous event, no one will take a piece of paper and exchange it for anything of value.

Like investing in anything else, buying gold for financial security has a learning curve and isn’t right for everyone. However, it may be a good option for you if you’re looking for new ways to diversify your portfolio. 

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